Despite popular belief, not everything will go according to plan when you are investing in real estate. You can have the best intentions and do everything right, but sometimes things just happen on a particular deal. How you respond to adversity will dictate how others view you and your investing business. If you run away from the problem or point fingers at everyone else, people will know that you cannot be relied on in difficult situations. Regardless of whether it is your fault or not, when things start to fall apart you need to do your best to keep things together.
The first rule in crisis management is to not throw anyone under the bus. Closing a successful real estate deal often requires many different people to be on the same page. Between the buyer, seller, multiple realtors, multiple attorneys, mortgage brokers, appraisers and contractors, there are many different people involved in the deal that can drop the ball at any given time. Your contractor may have given you dates they couldn’t honor or a budget you could never keep, but the investors you may have partnered with could care less. They will expect you to keep your end of the deal. By assigning blame to others you are the one that looks like you don’t know what you are doing or can’t handle the situation. Experienced people in your network will know what the deal is without you having to tell them. If you talk badly about other people in the deal to your contacts, they will assume that you will talk about them at some point too. Problems in a deal can often be fixed, but if you make them worse by blaming others you may not get another chance to get deals from your network.
Instead of assigning blame and pointing fingers, you should work quickly on solving the problem. Despite how easy it may seem, there will be many times when things are unable to progress because of some sort of complication. As soon as you know there is a problem, turn your focus on getting it solved. This often means doing things that may not be “your job” or going the extra mile to solve the issue. There is a fine line between overstepping your bounds and letting other professionals do their job, but many times a deal needs a leader or someone that can put everything together. If you are buying and there is a problem, you are responsible for everything involved. The sooner you can get to work on the issue instead of pointing fingers, the quicker the issues will get solved.
If you are working with partners or have private money behind you, they need to be kept in the know. The biggest issue that most private money lenders or other professionals have in a deal is not getting updates. As soon as you know something, good or bad, you have to pass that information along. By trying to cover a problem up or avoid communication altogether, you make the problem much worse and make yourself look bad in the process. People that you work with appreciate candor and contact almost as much as whether or not you can make money. Closing a deal is always critical, but if you don’t return calls or don’t respond, any success you have will be short lived. As soon as you have negative news, you need to let everyone know. It is better to bite the bullet and explain what is going on when it happens than have to answer to “why didn’t I know this sooner” if you wait a few days.
The allure of closing a deal is not worth losing your principals and morals over. What you never want to do is to make a bad situation worse by doing something that you will regret. There are plenty of other deals out there and you may even be able to gain some credibility with your partners or contacts if you face the music head on. If you try to cut some legal corners or bend your ethical standards, you may save the deal or avoid losing money, but the risk is far greater than that. In addition to possibly paying a large fine or serving jail time, your contacts will see your true colors and most likely avoid you in future deals. A bad situation can always be made worse if you let it.
There are plenty of ways that a deal can go sour. Nearly every investor will deal with major issues at some point or another. When that time comes, what you do and how you do it will be a turning point for you and your business. Nine out of ten deals will go off without a hitch, but that one deal can change everything. By keeping your composure and fighting the urge to blame others you can solve the problem or gain credibility with your partners. Never turn a small problem into a much bigger one.